Document
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________
FORM 10-Q
 ____________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to              
Commission file number: 1-12882
___________________________________________________

BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
 ____________________________________________________
Nevada
 
88-0242733
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3883 Howard Hughes Parkway, Ninth Floor, Las Vegas, NV 89169
(Address of principal executive offices) (Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
 ____________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
 
Accelerated filer
 
o
 
 
 
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
 
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
 
Class
 
Outstanding as of August 3, 2016
 
 
Common stock, $0.01 par value
 
112,276,228
 





BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2016
TABLE OF CONTENTS
 
 
 
Page
No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





PART I. Financial Information

Item 1.        Financial Statements (Unaudited)

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
 
June 30,
 
December 31,
(In thousands, except share data)
2016
 
2015
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
628,278

 
$
158,821

Restricted cash
20,719

 
19,030

Accounts receivable, net
26,765

 
25,289

Inventories
15,361

 
15,462

Prepaid expenses and other current assets
43,139

 
37,250

Income taxes receivable
1,615

 
1,380

Total current assets
735,877

 
257,232

Property and equipment, net
2,206,216

 
2,225,342

Other assets, net
47,541

 
48,341

Intangible assets, net
882,084

 
890,054

Goodwill, net
685,310

 
685,310

Investment in unconsolidated subsidiary held for sale
272,292

 
244,621

Total assets
$
4,829,320

 
$
4,350,900

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities
 
 
 
Current maturities of long-term debt
$
29,750

 
$
29,750

Accounts payable
72,486

 
75,803

Accrued liabilities
257,908

 
249,518

Total current liabilities
360,144

 
355,071

Long-term debt, net of current maturities and debt issuance costs
3,628,112

 
3,239,799

Deferred income taxes
175,452

 
162,189

Other long-term tax liabilities
3,212

 
3,085

Other liabilities
85,361

 
82,745

Commitments and contingencies (Notes 3, 8 and 13)
 
 
 
Stockholders' equity
 
 
 
Preferred stock, $0.01 par value, 5,000,000 shares authorized
—

 
—

Common stock, $0.01 par value, 200,000,000 shares authorized; 112,269,993 and 111,614,420 shares outstanding
1,123

 
1,117

Additional paid-in capital
950,514

 
945,041

Accumulated deficit
(374,669
)
 
(437,881
)
Accumulated other comprehensive income (loss)
21

 
(316
)
Total Boyd Gaming Corporation stockholders' equity
576,989

 
507,961

Noncontrolling interest
50

 
50

Total stockholders' equity
577,039

 
508,011

Total liabilities and stockholders' equity
$
4,829,320

 
$
4,350,900


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


3



BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands, except per share data)
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Gaming
$
452,928

 
$
468,580

 
$
915,479

 
$
933,337

Food and beverage
75,898

 
77,909

 
152,698

 
154,205

Room
43,365

 
42,332

 
85,240

 
81,685

Other
29,693

 
30,642

 
61,159

 
60,327

Gross revenues
601,884

 
619,463

 
1,214,576

 
1,229,554

Less promotional allowances
57,010

 
59,596

 
117,324

 
119,109

Net revenues
544,874

 
559,867

 
1,097,252

 
1,110,445

Operating costs and expenses
 
 
 
 
 
 
 
Gaming
217,768

 
224,686

 
441,293

 
451,383

Food and beverage
42,116

 
42,913

 
83,919

 
84,480

Room
11,293

 
10,682

 
21,792

 
20,729

Other
18,827

 
19,744

 
38,159

 
39,390

Selling, general and administrative
79,002

 
81,013

 
160,853

 
162,702

Maintenance and utilities
25,009

 
26,616

 
48,857

 
51,935

Depreciation and amortization
48,250

 
51,964

 
95,903

 
103,906

Corporate expense
16,099

 
17,352

 
34,006

 
37,004

Project development, preopening and writedowns
5,897

 
1,749

 
7,738

 
2,704

Impairments of assets
—

 
—

 
1,440

 
1,065

Other operating items, net
123

 
54

 
552

 
170

Total operating costs and expenses
464,384

 
476,773

 
934,512

 
955,468

Operating income
80,490

 
83,094

 
162,740

 
154,977

Other expense (income)
 
 
 
 
 
 
 
Interest income
(959
)
 
(465
)
 
(1,456
)
 
(936
)
Interest expense, net of amounts capitalized
61,887

 
57,131

 
114,952

 
114,066

Loss on early extinguishments of debt
419

 
30,962

 
846

 
31,470

Other, net
65

 
1,270

 
142

 
1,888

Total other expense, net
61,412

 
88,898

 
114,484

 
146,488

Income before income taxes
19,078

 
(5,804
)
 
48,256

 
8,489

Income taxes benefit (provision)
(7,771
)
 
(6,586
)
 
(15,389
)
 
9,625

Income (loss) from continuing operations, net of tax
11,307

 
(12,390
)
 
32,867

 
18,114

Income (loss) from discontinued operations, net of tax
18,715

 
5,965

 
30,345

 
10,564

Net income (loss)
$
30,022

 
$
(6,425
)
 
$
63,212

 
$
28,678

 
 
 
 
 
 
 
 
Basic net income (loss) per common share
 
 
 
 
 
 
 
Continuing operations
$
0.10

 
$
(0.11
)
 
$
0.29

 
$
0.17

Discontinued operations
0.16

 
0.05

 
0.27

 
0.09

Basic net income (loss) per common share
$
0.26

 
$
(0.06
)
 
$
0.56

 
$
0.26

Weighted average basic shares outstanding
114,328

 
112,232

 
114,218

 
111,841

 
 
 
 
 
 
 
 
Diluted net income (loss) per common share
 
 
 
 
 
 
 
Continuing operations
$
0.10

 
$
(0.11
)
 
$
0.29

 
$
0.16

Discontinued operations
0.16

 
0.05

 
0.26

 
0.09

Diluted net income (loss) per common share
$
0.26

 
$
(0.06
)
 
$
0.55

 
$
0.25

Weighted average diluted shares outstanding
115,077

 
112,232

 
114,974

 
112,694


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4



BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands)
2016
 
2015
 
2016
 
2015
Net income (loss)
$
30,022

 
$
(6,425
)
 
$
63,212

 
$
28,678

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Fair value adjustments to available-for-sale securities, net of tax
(185
)
 
(1,033
)
 
337

 
(763
)
Comprehensive income (loss) attributable to Boyd Gaming Corporation
$
29,837

 
$
(7,458
)
 
$
63,549

 
$
27,915


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5



BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)

 
Boyd Gaming Corporation Stockholders' Equity
 
 
 
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 
Noncontrolling
Interest
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands, except share data)
Shares
 
Amount
 
 
 
 
 
Balances, January 1, 2016
111,614,420

 
$
1,117

 
$
945,041

 
$
(437,881
)
 
$
(316
)
 
$
50

 
$
508,011

Net income
—

 
—

 
—

 
63,212

 
—

 
—

 
63,212

Comprehensive income attributable to Boyd
—

 
—

 
—

 
—

 
337

 
—

 
337

Stock options exercised
241,546

 
2

 
1,437

 
—

 
—

 
—

 
1,439

Release of restricted stock units, net of tax
255,000

 
2

 
(678
)
 
—

 
—

 
—

 
(676
)
Release of performance stock units, net of tax
159,027

 
2

 
(869
)
 
—

 
—

 
—

 
(867
)
Share-based compensation costs
—

 
—

 
5,583

 
—

 
—

 
—

 
5,583

Balances, June 30, 2016
112,269,993

 
$
1,123

 
$
950,514

 
$
(374,669
)
 
$
21

 
$
50

 
$
577,039

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, January 1, 2015
109,277,060

 
$
1,093

 
$
922,112

 
$
(485,115
)
 
$
(53
)
 
$
50

 
$
438,087

Net income
—

 
—

 
—

 
28,678

 
—

 
—

 
28,678

Comprehensive income attributable to Boyd
—

 
—

 
—

 
—

 
(763
)
 
—

 
(763
)
Stock options exercised
632,972

 
6

 
4,587

 
—

 
—

 
—

 
4,593

Release of restricted stock units, net of tax
81,058

 
1

 
(48
)
 
—

 
—

 
—

 
(47
)
Release of performance stock units, net of tax
481,749

 
5

 
(2,451
)
 
—

 
—

 
—

 
(2,446
)
Share-based compensation costs
—

 
—

 
6,367

 
—

 
—

 
—

 
6,367

Balances, June 30, 2015
110,472,839

 
$
1,105

 
$
930,567

 
$
(456,437
)
 
$
(816
)
 
$
50

 
$
474,469


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


6
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


 
Six Months Ended
 
June 30,
(In thousands)
2016
 
2015
Cash Flows from Operating Activities
 
 
 
Net income (loss)
$
63,212

 
$
28,678

Net (income) loss from discontinued operations
(30,345
)
 
(10,564
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
95,903

 
103,906

Amortization of debt financing costs and discounts on debt
9,077

 
11,175

Share-based compensation expense
5,583

 
6,367

Deferred income taxes
13,282

 
12,130

Non-cash impairment of assets
1,440

 
1,065

Loss on early extinguishments of debt
846

 
31,470

Other operating activities
858

 
(792
)
Changes in operating assets and liabilities:
 
 
 
Restricted cash
(1,690
)
 
(3,379
)
Accounts receivable, net
(1,297
)
 
(1,391
)
Inventories
99

 
597

Prepaid expenses and other current assets
(5,859
)
 
(8,401
)
Current other tax asset
—

 
1,802

Income taxes receivable
(235
)
 
1,243

Other assets, net
(691
)
 
1,625

Accounts payable and accrued liabilities
7,334

 
279

Other long-term tax liabilities
127

 
(23,067
)
Other liabilities
2,617

 
3,033

Net cash provided by operating activities
160,261

 
155,776

Cash Flows from Investing Activities
 
 
 
Capital expenditures
(72,447
)
 
(58,112
)
Other investing activities
704

 
2,975

Net cash used in investing activities
(71,743
)
 
(55,137
)
Cash Flows from Financing Activities
 
 
 
Borrowings under Boyd Gaming bank credit facility
223,900

 
396,100

Payments under Boyd Gaming bank credit facility
(530,350
)
 
(679,525
)
Borrowings under Peninsula bank credit facility
165,000

 
170,800

Payments under Peninsula bank credit facility
(217,225
)
 
(223,187
)
Proceeds from issuance of senior notes
750,000

 
750,000

Debt financing costs, net
(12,936
)
 
(13,496
)
Payments on retirements of long-term debt
—

 
(500,000
)
Premium and consent fees paid
—

 
(24,246
)
Share-based compensation activities, net
(104
)
 
2,100

Other financing activities
—

 
(3
)
Net cash provided by (used in) financing activities
378,285

 
(121,457
)
Cash Flows from Discontinued Operations
 
 
 
Cash flows from operating activities
2,654

 
—

Cash flows from investing activities
—

 
—

Cash flows from financing activities
—

 
—

Net cash provided by discontinued operations
2,654

 
—

Change in cash and cash equivalents
469,457

 
(20,818
)
Cash and cash equivalents, beginning of period
158,821

 
145,341

Cash and cash equivalents, end of period
$
628,278

 
$
124,523

Supplemental Disclosure of Cash Flow Information
 
 
 
Cash paid for interest, net of amounts capitalized
$
92,940

 
$
100,699

Cash paid (received) for income taxes, net of refunds
2,198

 
(2,408
)
Supplemental Schedule of Noncash Investing and Financing Activities
 
 
 
Payables incurred for capital expenditures
$
7,140

 
$
6,939

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7



BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________
NOTE 1.    ORGANIZATION AND BASIS OF PRESENTATION
Organization
Boyd Gaming Corporation (and together with its subsidiaries, the "Company," "Boyd Gaming," "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD."

We are a diversified operator of 21 wholly owned gaming entertainment properties. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi.

Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the U.S. Securities and Exchange Commission ("SEC") on February 25, 2016.

The results for the periods indicated are unaudited, but reflect all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods.

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming and its wholly owned subsidiaries. Investments in unconsolidated affiliates, which do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation. On May 31, 2016, we announced that we had entered into an Equity Purchase Agreement (the “Purchase Agreement”) to sell our 50% equity interest in Marina District Development Holding Company, LLC ("MDDHC"), the parent company of Borgata Hotel Casino & Spa ("Borgata"), to MGM Resorts International ("MGM"), and the transaction closed on August 1, 2016. (See Note 3, Acquisitions and Divestitures.) We account for our investment in Borgata applying the equity method and report its results as discontinued operations for all periods presented in these condensed consolidated financial statements.

Revisions and Reclassifications
The financial information for the three and six months ended June 30, 2015 is derived from our condensed consolidated financial statements and footnotes included in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and has been revised to reflect the results of operations and cash flows of our equity investment in Borgata as discontinued operations. (See Note 3, Acquisitions and Divestitures)

Asset transaction costs that were previously disaggregated in our condensed consolidated statement of operations for the three and six months ended June 30, 2015 were accumulated with preopening expenses. This reclassification had no effect on our retained earnings or net income as previously reported.

Amortization of debt financing costs and amortization of discounts on debt, which were previously disaggregated in our condensed consolidated statement of cash flows for the six months ended June 30, 2015, were combined. This reclassification had no effect on our cash provided by operating activities as previously reported.

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments, which include cash on hand and in banks, interest-bearing deposits and money market funds with maturities of three months or less at their date of purchase. The instruments are not restricted as to withdrawal or use and are on deposit with high credit quality financial institutions. Although these balances may at times exceed the federal insured deposit limit, we believe such risk is mitigated by the quality of the institution holding such deposit. The carrying values of these instruments approximate their fair values as such balances are generally available on demand.

8
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________


Promotional Allowances
The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as a promotional allowance. Promotional allowances also include incentives earned in our slot bonus program such as cash and the estimated retail value of goods and services (such as complimentary rooms and food and beverages). We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time for complimentary slot play, food and beverage, and to a lesser extent for other goods or services, depending upon the property.

The amounts included in promotional allowances are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands)
2016
 
2015
 
2016
 
2015
Rooms
$
18,294

 
$
19,188

 
$
37,239

 
$
37,932

Food and beverage
35,660

 
37,131

 
73,112

 
74,845

Other
3,056

 
3,277

 
6,973

 
6,332

Total promotional allowances
$
57,010

 
$
59,596

 
$
117,324

 
$
119,109


The estimated costs of providing such promotional allowances are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands)
2016
 
2015
 
2016
 
2015
Rooms
$
7,921

 
$
8,470

 
$
16,490

 
$
17,252

Food and beverage
30,842

 
32,397

 
64,113

 
65,949

Other
3,000

 
2,888

 
5,981

 
5,675

Total estimated cost of promotional allowances
$
41,763

 
$
43,755

 
$
86,584

 
$
88,876


Gaming Taxes
We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the condensed consolidated statements of operations. These taxes totaled approximately $81.5 million and $85.5 million for the three months ended June 30, 2016 and 2015, respectively, and $164.1 million and $168.9 million for the six months ended June 30, 2016 and 2015, respectively.

Income Taxes
Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence it is more likely than not that such assets will not be realized. Use of the term "more likely than not" indicates the likelihood of occurrence is greater than 50%. Accordingly, the need to establish valuation allowances for deferred tax assets is continually assessed based on a more likely than not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies.

As of June 30, 2016, we concluded that it was not more likely than not that the benefit from our deferred tax assets would be realized. As a result of our analysis, a valuation allowance of $231.6 million has been recorded on our federal and state income tax net operating loss carryforwards and other deferred tax assets. Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above. Based on recent earnings and the gain on the sale of our membership interest in Borgata, in the third quarter of 2016, it is likely that sufficient positive evidence will become available to reach a conclusion that all or a portion of the valuation allowance will no longer be needed. As such, the Company may release a significant portion of its valuation allowance against its deferred tax assets in the third quarter of 2016. However,

9
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

the exact timing will be dependent on the levels of income achieved and management's visibility into future period results. The release of our valuation allowance would result in the recognition of certain deferred tax assets and a non-cash income tax benefit in the period in which the release is recorded.

For the six months ended June 30, 2016 and 2015, we have computed our provision for income taxes by applying the actual effective tax rate, under the discrete method, to year-to-date income. The discrete method was used to calculate income tax expense or benefit as the annual effective tax rate was not considered a reliable estimate of year-to-date income tax expense or benefit. We believe this method provides the most reliable estimate of year-to-date income tax expense.

Our tax rate is impacted by adjustments that are largely independent of our operating results before taxes.  Such adjustments relate primarily to changes in our valuation allowance and the accrual of non-cash tax expense in connection with the tax amortization of indefinite-lived intangible assets that are not available to offset existing deferred tax assets.  The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in the net operating loss deferred tax assets when determining our valuation allowance.

Other Long Term Tax Liabilities
The Company's income tax returns are subject to examination by the Internal Revenue Service ("IRS") and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes, which prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. Recognition occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement is only addressed if the position is deemed to be more likely than not to be sustained. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement.

Tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period that they meet the "more likely than not" standard. If it is subsequently determined that a previously recognized tax position no longer meets the "more likely than not" standard, it is required that the tax position is derecognized. Accounting standards for uncertain tax positions specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes. Accrued interest and penalties are included in other long-term tax liabilities on the balance sheet.

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements
Accounting Standards Update 2016-13, Financial Instruments-Credit Losses ("Update 2016-13")
In June 2016, the Financial Accounting Standards Board ("FASB") issued Update 2016-13, which amends the guidance on the impairment of financial instruments. Update 2016-13 adds to GAAP an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-13 to the financial statements.

Accounting Standards Update 2016-12, Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients ("Update 2016-12"); Accounting Standards Update 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting ("Update 2016-11"); Accounting Standards Update 2016-10, Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing ("Update 2016-10"); and Accounting Standards Update 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("Update 2016-08")

10
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

In March 2016 through May 2016, the FASB issued Update 2016-08, Update 2016-10, Update 2016-11 and Update 2016-12, which amend and further clarify the new revenue standard, Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("Update 2014-09"), which was subsequently amended and deferred in Accounting Standards Update 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date ("Update 2015-14", and collectively with the original standard, Update 2014-09, and subsequent amendments, Update 2016-08, Update 2016-10, Update 2016-11 and Update 2016-12, the "Revenue Standard"). The Revenue Standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Earlier application is permitted only for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is evaluating the impact of the Revenue Standard on its consolidated financial statements.

Accounting Standards Update 2016-09, Compensation - Stock Compensation ("Update 2016-09")
In March 2016, the FASB issued Update 2016-09 which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2016, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-09 to the financial statements.

Accounting Standards Update 2016-07, Investments - Equity Method and Joint Ventures ("Update 2016-07")
In March 2016, the FASB issued Update 2016-07 which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2016, and early adoption is permitted. The Company determined that the impact of the new standard on its consolidated financial statements will not be material.

Accounting Standards Update 2016-02, Leases ("Update 2016-02")
In February 2016, the FASB issued Update 2016-02 which requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-02 to the financial statements.

Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities ("Update 2016-01")
In January 2016, the FASB issued Update 2016-01, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted only if explicit early adoption guidance is applied. The Company is evaluating the impact of the new standard on its consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

NOTE 3.    ACQUISITIONS AND DIVESTITURES
Acquisitions
On April 21, 2016, Boyd Gaming announced it has entered into a definitive agreement to acquire ALST Casino Holdco, LLC (“ALST”), the holding company of Aliante Gaming, LLC (“Aliante”), the owner and operator of the Aliante Casino + Hotel + Spa, an upscale, resort-style casino and hotel situated in North Las Vegas and offering premium accommodations, gaming, dining, entertainment and retail for total net cash consideration of $380 million.

Boyd Gaming will acquire ALST pursuant to an Agreement and Plan of Merger (the “ALST Merger Agreement”) entered into on April 21, 2016, by and among, Boyd Gaming, Boyd TCII Acquisition, LLC, a wholly-owned subsidiary of Boyd Gaming (“TCII Acquisition”), and ALST. The ALST Merger Agreement provides that, pursuant to the terms and subject to the conditions set forth therein, TCII Acquisition will merge (the “ALST Merger”) with and into ALST, and ALST will be the surviving entity in the ALST Merger, such that following the ALST Merger, ALST and Aliante will be wholly-owned subsidiaries of Boyd Gaming.


11
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

The ALST Merger Agreement contains certain termination rights for both Boyd Gaming and ALST and further provides that, in connection with the termination of the ALST Merger Agreement under specified circumstances, Boyd Gaming may be required to pay ALST a termination fee of $30 million.

On April 25, 2016, Boyd Gaming announced it has entered into a definitive agreement to acquire The Cannery Hotel and Casino, LLC (“Cannery”), the owner and operator of Cannery Casino Hotel located in North Las Vegas, and Nevada Palace, LLC (“Eastside”), the owner and operator of Eastside Cannery Casino and Hotel located in the eastern part of the Las Vegas Valley, comprising the Las Vegas assets of Cannery Casino Resorts, LLC (“CCR”), for total cash consideration of $230 million, subject to adjustment based on the working capital, including cash and less indebtedness of the acquired assets and less any transaction expenses.

Boyd Gaming will acquire Cannery and Eastside pursuant to a Membership Interest Purchase Agreement (the “Cannery Purchase Agreement”) entered into on April 25, 2016, by and among, Boyd Gaming, CCR, Cannery and Eastside. The Cannery Purchase Agreement provides that, pursuant to the terms and subject to the conditions set forth therein, Boyd Gaming will acquire from CCR all of the issued and outstanding membership interests of Cannery and Eastside (the “Cannery Purchase”), such that, following the Cannery Purchase, Cannery and Eastside will be wholly-owned subsidiaries of Boyd Gaming.

The Cannery Purchase Agreement contains customary representations, warranties, covenants and termination rights. In addition, $20 million of the cash consideration will be placed in escrow to satisfy the indemnification obligations of CCR.

The completion of the ALST Merger and the Cannery Purchase are each subject to customary conditions and the receipt of all required regulatory approvals, including, among others, approval by the Nevada Gaming Commission and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Subject to the satisfaction or waiver of the respective conditions in each of the ALST Merger Agreement and the Cannery Purchase Agreement, we currently expect each of the transactions to close before the end of 2016.

Investment in and Divestiture of Borgata
Prior to the sale of our equity interest, which closed on August 1, 2016, the Company and MGM each held a 50% interest in MDDHC, which owns all the equity interests in Borgata. Until the closing of the sale, we were the managing member of MDDHC, and we were responsible for the day-to-day operations of Borgata.

Pursuant to the Purchase Agreement, on August 1, 2016, MGM acquired from Boyd Gaming 49% of its 50% membership interest in MDDHC and, immediately thereafter, MDDHC redeemed Boyd Gaming’s remaining 1% membership interest in MDDHC (collectively, the “Transaction”). Following the Transaction, MDDHC became a wholly-owned subsidiary of MGM.

In consideration for the Transaction, MGM paid Boyd Gaming $900 million. The initial net cash proceeds were approximately $589 million, net of certain expenses and adjustments on the closing date in the form of outstanding indebtedness, cash and working capital. These initial proceeds do not include our 50% share of any future property tax settlement benefits, to which Boyd Gaming retains the right to receive upon payment. Borgata estimates that it is entitled to property tax refunds totaling $160 million, including amounts due under court decisions rendered in its favor and estimates for open tax appeals.

We reflect the results of operations and cash flows from our investment in Borgata as discontinued operations for all periods presented in these condensed consolidated financial statements.

12
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________


Summarized income statement information for Borgata is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands)
2016
 
2015
 
2016
 
2015
Net revenues
$
203,347

 
$
191,163

 
$
393,640

 
$
373,752

Operating expenses
150,195

 
160,986

 
302,815

 
320,225

Operating income
53,152

 
30,177

 
90,825

 
53,527

Non-operating expenses
15,764

 
18,224

 
30,176

 
33,546

Net income (loss)
$
37,388

 
$
11,953

 
$
60,649

 
$
19,981


NOTE 4.    PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
 
June 30,
 
December 31,
(In thousands)
2016
 
2015
Land
$
228,417

 
$
229,857

Buildings and improvements
2,560,891

 
2,539,578

Furniture and equipment
1,179,455

 
1,152,277

Riverboats and barges
238,826

 
238,743

Construction in progress
51,958

 
42,497

Other
7,404

 
7,404

Total property and equipment
4,266,951

 
4,210,356

Less accumulated depreciation
2,060,735

 
1,985,014

Property and equipment, net
$
2,206,216

 
$
2,225,342


Other property and equipment presented in the table above relates to the estimated net realizable value of construction materials inventory that was not disposed of with the 2013 sale of the Echelon development project. Such assets are not in service and are not currently being depreciated.

Depreciation expense is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands)
2016
 
2015
 
2016
 
2015
Depreciation expense
$
44,266

 
$
45,159

 
$
87,821

 
$
90,261



13
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

NOTE 5.    INTANGIBLE ASSETS
Intangible assets consist of the following:
 
June 30, 2016
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
(In thousands)
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
Amortizing intangibles
 
 
 
 
 
 
 
 
 
Customer relationships
1.4 years
 
$
136,300

 
$
(117,429
)
 
$
—

 
$
18,871

Favorable lease rates
31.9 years
 
45,370

 
(12,532
)
 
—

 
32,838

Development agreement
—
 
21,373

 
—

 
—

 
21,373

 
 
 
203,043

 
(129,961
)
 
—

 
73,082

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets
 
 
 
 
 
 
 
 
 
Trademarks and other
Indefinite
 
129,501

 
—

 
(3,500
)
 
126,001

Gaming license rights
Indefinite
 
873,335

 
(33,960
)
 
(156,374
)
 
683,001

 
 
 
1,002,836

 
(33,960
)
 
(159,874
)
 
809,002

Balance, June 30, 2016
 
 
$
1,205,879

 
$
(163,921
)
 
$
(159,874
)
 
$
882,084


 
December 31, 2015
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
(In thousands)
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
Amortizing intangibles
 
 
 
 
 
 
 
 
 
Customer relationships
1.9 years
 
$
136,300

 
$
(109,994
)
 
$
—

 
$
26,306

Favorable lease rates
32.4 years
 
45,370

 
(11,997
)
 
—

 
33,373

Development agreement
—
 
21,373

 
—

 
—

 
21,373

 
 
 
203,043

 
(121,991
)
 
—

 
81,052

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets
 
 
 
 
 
 
 
 
 
Trademarks
Indefinite
 
129,501

 
—

 
(3,500
)
 
126,001

Gaming license rights
Indefinite
 
873,335

 
(33,960
)
 
(156,374
)
 
683,001

 
 
 
1,002,836

 
(33,960
)
 
(159,874
)
 
809,002

Balance, December 31, 2015
 
 
$
1,205,879

 
$
(155,951
)
 
$
(159,874
)
 
$
890,054


NOTE 6.    ACCRUED LIABILITIES
Accrued liabilities consist of the following:
 
June 30,
 
December 31,
(In thousands)
2016
 
2015
Payroll and related expenses
$
63,696

 
$
71,815

Interest
47,008

 
35,337

Gaming liabilities
34,702

 
37,496

Player loyalty program liabilities
18,003

 
18,491

Other accrued liabilities
94,499

 
86,379

Total accrued liabilities
$
257,908

 
$
249,518



14
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

NOTE 7.    LONG-TERM DEBT
Long-term debt, net of current maturities consists of the following:
 
 
 
June 30, 2016
 
Interest
 
 
 
 
 
Unamortized
 
 
 
Rates at
 
Outstanding
 
Unamortized
 
Origination
 
Long-Term
(In thousands)
June 30, 2016
 
Principal
 
Discount
 
Fees and Costs
 
Debt, Net
Boyd Gaming Corporation Debt
 
 
 
 
 
 
 
 
 
Bank credit facility
3.89
%
 
$
903,275

 
$
(2,152
)
 
$
(8,134
)
 
$
892,989

9.00% senior notes due 2020
9.00
%
 
350,000

 
—

 
(6,250
)
 
343,750

6.875% senior notes due 2023
6.88
%
 
750,000

 
—

 
(12,087
)
 
737,913

6.375% senior notes due 2026
6.38
%
 
750,000

 
—

 
(12,554
)
 
737,446

 
 
 
2,753,275

 
(2,152
)
 
(39,025
)
 
2,712,098

 
 
 
 
 
 
 
 
 
 
Peninsula Segment Debt
 
 
 
 
 
 
 
 
 
Bank credit facility
4.25
%
 
610,525

 
—

 
(9,788
)
 
600,737

8.375% senior notes due 2018
8.38
%
 
350,000

 
—

 
(4,973
)
 
345,027

 
 
 
960,525

 
—

 
(14,761
)
 
945,764

Total long-term debt
 
 
3,713,800

 
(2,152
)
 
(53,786
)
 
3,657,862

Less current maturities
 
 
29,750

 
—

 
—

 
29,750

Long-term debt, net
 
 
$
3,684,050

 
$
(2,152
)
 
$
(53,786
)
 
$
3,628,112


 
 
 
December 31, 2015
 
Interest
 
 
 
 
 
Unamortized
 
 
 
Rates at
 
Outstanding
 
Unamortized
 
Origination
 
Long-Term
(In thousands)
Dec. 31, 2015
 
Principal
 
Discount
 
Fees and Costs
 
Debt, Net
Boyd Gaming Corporation Debt
 
 
 
 
 
 
 
 
 
Bank credit facility
3.75
%
 
$
1,209,725

 
$
(2,702
)
 
$
(9,746
)
 
$
1,197,277

9.00% senior notes due 2020
9.00
%
 
350,000

 
—

 
(7,044
)
 
342,956

6.875% senior notes due 2023
6.88
%
 
750,000

 
—

 
(12,934
)
 
737,066

 
 
 
2,309,725

 
(2,702
)
 
(29,724
)
 
2,277,299

 
 
 
 
 
 
 
 
 
 
Peninsula Segment Debt
 
 
 
 
 
 
 
 
 
Bank credit facility
4.25
%
 
662,750

 
—

 
(14,143
)
 
648,607

8.375% senior notes due 2018
8.38
%
 
350,000

 
—

 
(6,357
)
 
343,643

 
 
 
1,012,750

 
—

 
(20,500
)
 
992,250

Total long-term debt
 
 
3,322,475

 
(2,702
)
 
(50,224
)
 
3,269,549

Less current maturities
 
 
29,750

 
—

 
—

 
29,750

Long-term debt, net
 
 
$
3,292,725

 
$
(2,702
)
 
$
(50,224
)
 
$
3,239,799



15
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

Boyd Gaming Debt
Boyd Bank Credit Facility
The outstanding principal amounts under the Third Amended and Restated Credit Agreement (the "Boyd Gaming Credit Facility") are comprised of the following:
 
June 30,
 
December 31,
(In thousands)
2016
 
2015
Revolving Credit Facility
$
—

 
$
240,000

Term A Loan
177,025

 
183,275

Term B Loan
726,250

 
730,750

Swing Loan
—

 
55,700

Total outstanding principal amounts under the Boyd Gaming Credit Facility
$
903,275

 
$
1,209,725


At June 30, 2016, approximately $0.9 billion was outstanding under the Boyd Gaming Credit Facility and $7.1 million was allocated to support various letters of credit, leaving remaining contractual availability of $592.9 million.

Senior Notes
6.375% Senior Notes due April 2026
Significant Terms
On March 28, 2016, we issued $750 million aggregate principal amount of 6.375% senior notes due April 2026 (the "6.375% Notes"). The 6.375% Notes require semi-annual interest payments on April 1 and October 1 of each year, commencing on October 1, 2016. The 6.375% Notes will mature on April 1, 2026 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. Net proceeds from the 6.375% Notes were used to pay down the outstanding amount under the Boyd Gaming Revolving Credit Facility and the balance was deposited in money market funds and classified as cash equivalents on the condensed consolidated balance sheets.

In conjunction with the issuance of the 6.375% Notes, we incurred approximately $13.0 million in debt financing costs that have been deferred and are being amortized over the term of the 6.375% Notes using the effective interest method.

The 6.375% Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the 6.375% Notes, together, the "Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the Indenture), we will be required, unless certain conditions are met, to offer to repurchase the 6.375% Notes at a price equal to 101% of the principal amount of the 6.375% Notes, plus accrued and unpaid interest and Additional Interest (as defined in the Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the 6.375% Notes.

At any time prior to April 1, 2021, we may redeem the 6.375% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. After April 1, 2021, we may redeem all or a portion of the 6.375% Notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.188% in 2021 to 100% in 2024 and thereafter, plus accrued and unpaid interest and Additional Interest.

In connection with the private placement of the 6.375% Notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the 6.375% Notes. We must use commercially reasonable efforts to file a registration statement and to consummate an exchange offer within 365 days after the issuance of the 6.375% Notes, subject to certain suspension and other rights set forth in the registration rights agreement. Under certain circumstances, including our determination that we cannot complete an exchange offer, we are required to file a shelf registration statement for the resale of the 6.375% Notes and to cause such shelf registration statement to be declared effective as soon as reasonably practicable (but in no event later than the 365th day following the issuance of the 6.375% Notes) after the occurrence of such circumstances. Subject to certain suspension and other rights, in the event that the registration statement is not filed or declared effective within the time periods specified in the registration rights agreement, the exchange offer is not consummated within 365 days after the issuance of the 6.375% Notes, or the registration statement is filed and declared effective

16
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

but thereafter ceases to be effective or is unusable for its intended purpose for a period in excess of 30 days without being succeeded immediately by a post-effective amendment that cures such failure, the agreement provides that additional interest will accrue on the principal amount of the 6.375% Notes at a rate of 0.25% per annum during the 90-day period immediately following any of these events and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event will the penalty rate exceed 1.00% per annum, until the default is cured. There are no other alternative settlement methods and, other than the 1.00% per annum maximum penalty rate, the agreement contains no limit on the maximum potential amount of consideration that could be transferred in the event we do not meet the registration statement filing requirements. We currently intend to file a registration statement, have it declared effective and consummate any exchange offer within these time periods. Accordingly, we do not believe that payment of additional interest under the registration payment arrangement is probable and, therefore, no related liability has been recorded in the consolidated financial statements.

Peninsula Segment Debt
Bank Credit Facility
The outstanding principal amounts under the Peninsula senior secured credit facility (the "Peninsula Credit Facility") are comprised of the following:
 
June 30,
 
December 31,
(In thousands)
2016
 
2015
Term Loan
$
596,625

 
$
647,750

Revolving Facility
7,000

 
9,000

Swing Loan
6,900

 
6,000

Total outstanding principal amounts under the Peninsula Credit Facility
$
610,525

 
$
662,750


At June 30, 2016, approximately $610.5 million was outstanding under the Peninsula Credit Facility and $5.0 million was allocated to support various letters of credit, leaving remaining contractual availability of $31.1 million.

Early Extinguishments of Debt
We incurred non-cash charges of $0.4 million and $1.0 million during the three months ended June 30, 2016 and 2015, respectively, and $0.8 million and $1.5 million for the six months ended June 30, 2016 and 2015, respectively, for deferred debt financing costs written off related to the Peninsula Credit Facility, which represents the ratable reduction in borrowing capacity due to optional prepayments made during these periods.

Additionally, for both the three and six months ended June 30, 2015, we incurred $30.0 million of loss on early extinguishments of debt related to optional prepayments of the Term Loans under the Boyd Gaming Credit Facility and the redemption of all of our 9.125% Senior Notes due December 2018 during the second quarter of 2015.

Covenant Compliance
As of June 30, 2016, we believe that Boyd Gaming and Peninsula were in compliance with the financial and other covenants of their respective debt instruments.

NOTE 8.    COMMITMENTS AND CONTINGENCIES
Commitments
There have been no material changes to our commitments described under Note 10, Commitments and Contingencies, in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 25, 2016, except for the pending acquisitions of ALST and the Las Vegas assets of CCR as discussed in Note 3, Acquisitions and Divestitures.

Contingencies
Legal Matters
We are parties to various legal proceedings arising in the ordinary course of business. In our opinion, all pending legal matters are either adequately covered by insurance, or, if not insured, will not have a material adverse impact on our financial position, results of operations or cash flows.


17
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

NOTE 9.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS
Share-Based Compensation
We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.

The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our condensed consolidated statements of operations.
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands)
2016
 
2015
 
2016
 
2015
Gaming
$
80

 
$
55

 
$
165

 
$
123

Food and beverage
15

 
11

 
31

 
24

Room
7

 
5

 
15

 
11

Selling, general and administrative
405

 
280

 
837

 
624

Corporate expense
1,813

 
2,575

 
4,535

 
5,585

Total share-based compensation expense
$
2,320

 
$
2,926

 
$
5,583

 
$
6,367


Performance Shares Vesting
The Performance Share Unit ("PSU") grants awarded in December 2012 and 2011 vested during first quarters of 2016 and 2015, respectively. Common shares were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") growth and customer service scores for the three-year performance period of the grant. As provided under the provisions of our stock incentive plan, certain of the participants elected to surrender a portion of the shares to be received to pay the withholding and other payroll taxes payable on the compensation resulting from the vesting of the PSUs.
The PSU grant awarded in December 2012 resulted in a total of 213,365 shares issued, representing approximately 0.59 shares per PSU. Of the 213,365 shares issued, a total of 54,338 were surrendered by the participants for payroll taxes, resulting a net issuance of 159,027 shares due to the vesting of the 2012 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2015; therefore, the vesting of the PSUs did not impact compensation costs in our 2016 condensed consolidated statement of operations.

The PSU grant awarded in December 2011 resulted in a total of 654,478 shares issued, representing approximately 1.67 shares per PSU. Of the 654,478 shares issued, a total of 177,274 were surrendered by the participants for payroll taxes, resulting a net issuance of 477,204 shares due to the vesting of the 2011 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2014; therefore, the vesting of the PSUs did not impact compensation costs in our 2015 condensed consolidated statement of operations.

NOTE 10.     FAIR VALUE MEASUREMENTS
The authoritative accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These inputs create the following fair value hierarchy:

Level 1: Quoted prices for identical instruments in active markets.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

18
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________


Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

Balances Measured at Fair Value
The following tables show the fair values of certain of our financial instruments:
 
June 30, 2016
(In thousands)
Balance
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
628,278

 
$
628,278

 
$
—

 
$
—

Restricted cash
20,719

 
20,719

 
—

 
—

Investment available for sale
17,832

 
—

 
—

 
17,832

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent payments
$
3,488

 
$
—

 
$
—

 
$
3,488


 
December 31, 2015
(In thousands)
Balance
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
158,821

 
$
158,821

 
$
—

 
$
—

Restricted cash
19,030

 
19,030

 
—

 
—

Investment available for sale
17,839

 
—

 
—

 
17,839

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent payments
$
3,632

 
$
—

 
$
—

 
$
3,632


Cash and Cash Equivalents and Restricted Cash
The fair value of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, are based on statements received from our banks at June 30, 2016 and December 31, 2015.

Investment Available for Sale
We have an investment in a single municipal bond issuance of $21.0 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities, and degrees of risk and a discounted cash flows analysis as of June 30, 2016 and December 31, 2015. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the condensed consolidated balance sheets. At both June 30, 2016 and December 31, 2015, $0.4 million of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at both June 30, 2016 and December 31, 2015, $17.4 million is included in other assets on the condensed consolidated balance sheets. The discount associated with this investment of $3.2 million at both June 30, 2016 and December 31, 2015, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of operations.

Contingent Payments
In connection with the development of the Kansas Star Casino ("KSC"), KSC agreed to pay a former casino project developer and option holder 1% of KSC's EBITDA each month for a period of ten years commencing on December 20, 2011. The liability is

19
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

recorded at the estimated fair value of the contingent payments using a discounted cash flows approach and the significant unobservable input used in the valuation at both June 30, 2016 and December 31, 2015, is a discount rate of 18.5%. At both June 30, 2016 and December 31, 2015, there was a current liability of $0.9 million related to this agreement, which is recorded in accrued liabilities on the respective condensed consolidated balance sheets, and long-term obligation at June 30, 2016 and December 31, 2015, of $2.6 million and $2.7 million, respectively, which is included in other liabilities on the respective condensed consolidated balance sheets.

The following table summarizes the changes in fair value of the Company's Level 3 assets and liabilities:
 
Three Months Ended
 
June 30, 2016
 
June 30, 2015
 
Assets
 
Liability
 
Assets
 
Liability
(In thousands)
Investment
Available for
Sale
 
Contingent
Payments
 
Investment
Available for
Sale
 
Contingent
Payments
Balance at beginning of reporting period
$
18,394

 
$
(3,560
)
 
$
18,658

 
$
(3,721
)
Total gains (losses) (realized or unrealized):
 
 
 
 
 
 
 
Included in earnings
33

 
(150
)
 
31

 
(161
)
Included in other comprehensive income (loss)
(185
)
 
—

 
(1,033
)
 
—

Transfers in or out of Level 3
—

 
—

 
—

 
—

Purchases, sales, issuances and settlements:
 
 
 
 
 
 
 
Settlements
(410
)
 
222

 
(380
)
 
240

Balance at end of reporting period
$
17,832

 
$
(3,488
)
 
$
17,276

 
$
(3,642
)
 
 
 
 
 
 
 
 
Gains (losses) included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date:
 
 
 
 
 
 
 
Included in interest income
$
33

 
$
—

 
$
31

 
$
—

Included in interest expense
—

 
(150
)
 
—

 
(161
)

 
Six Months Ended
 
June 30, 2016
 
June 30, 2015
 
Assets
 
Liability
 
Assets
 
Liability
(In thousands)
Investment
Available for
Sale
 
Contingent
Payments
 
Investment
Available for
Sale
 
Merger Earnout
 
Contingent
Payments
Balance at beginning of reporting period
$
17,839

 
$
(3,632
)
 
$
18,357

 
$
(75
)
 
$
(3,792
)
Total gains (losses) (realized or unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings
66

 
(305
)
 
62

 
75

 
(320
)
Included in other comprehensive income (loss)
337

 
—

 
(763
)
 
—

 
—

Transfers in or out of Level 3
—

 
—

 
—

 
—

 
—

Purchases, sales, issuances and settlements:
 
 
 
 
 
 
 
 
 
Settlements
(410
)
 
449

 
(380
)
 
—

 
470

Balance at end of reporting period
$
17,832

 
$
(3,488
)
 
$
17,276

 
$
—

 
$
(3,642
)
 
 
 
 
 
 
 
 
 
 
Gains (losses) included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date:
 
 
 
 
 
 
 
 
 
Included in interest income
$
66

 
$
—

 
$
62

 
$
—

 
$
—

Included in interest expense
—

 
(305
)
 
—

 
—

 
(320
)

20
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________


The table below summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities:
 
Valuation
Technique
 
Unobservable
Input
 
Rate
Investment available for sale
Discounted cash flow
 
Discount rate
 
9.7
%
Contingent payments
Discounted cash flow
 
Discount rate
 
18.5
%

Balances Disclosed at Fair Value
The following tables provide the fair value measurement information about our obligation under minimum assessment agreements and other financial instruments:
 
June 30, 2016
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Liabilities
 
 
 
 
 
 
 
Obligation under assessment arrangements
$
34,301

 
$
27,168

 
$
28,371

 
Level 3
Other financial instruments
100

 
93

 
93

 
Level 3

 
December 31, 2015
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Liabilities
 
 
 
 
 
 
 
Obligation under assessment arrangements
$
35,126

 
$
27,660

 
$
28,381

 
Level 3
Other financial instruments
200

 
186

 
186

 
Level 3

The following tables provide the fair value measurement information about our long-term debt:
 
June 30, 2016
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Boyd Gaming Corporation Debt
 
 
 
 
 
 
 
Bank credit facility
$
903,275

 
$
892,989

 
$
902,907

 
Level 2
9.00% senior notes due 2020
350,000

 
343,750

 
367,500

 
Level 1
6.875% senior notes due 2023
750,000

 
737,913

 
798,750

 
Level 1
6.375% senior notes due 2026
750,000

 
737,446

 
785,625

 
Level 1
 
2,753,275

 
2,712,098

 
2,854,782

 
 
 
 
 
 
 
 
 
 
Peninsula Segment Debt
 
 
 
 
 
 
 
Bank credit facility
610,525

 
600,737

 
611,301

 
Level 2
8.375% Senior Notes due 2018
350,000

 
345,027

 
352,188

 
Level 2
 
960,525

 
945,764

 
963,489

 
 
Total debt
$
3,713,800

 
$
3,657,862

 
$
3,818,271

 
 


21
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015
______________________________________________________________________________________________________

 
December 31, 2015
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Valu